Jet-Etihad deal: ministries object to ownership structure

Jet Airways and Etihad may have to re-work the ownership structure proposed in the Rs. 2,058 crore deal with key ministries including Civil Aviation and Corporate Affairs raising concerns over ultimate control of the domestic carrier.

"Major concerns on ultimate control of Jet Airways post deal have been raised by various ministries including Civil Aviation and Corporate Affairs. The issues were voiced at the FIPB meeting held on Friday," sources said.

The decision on the deal, struck by Jet Airways to sell 24 % of its stake to Abu Dhabi's Etihad Airways, was deferred by the Foreign Investment Promotion Board.

The deal is the largest foreign investment proposal in the aviation sector after the government allowed foreign carriers to pick up stake in Indian airlines last September.

Concerns have been primarily raised on the proposed ownership and control structure of the domestic airlines.

Sources said that capital market regulator Sebi, fair trade regulator CCI and Department of Industrial Policy and Promotion (DIPP) also have reservations about the transaction.

After the FIPB meeting on Friday, Economic Affairs Secretary Arvind Mayaram had said: "It (Jet-Etihad proposal) has been deferred. We need more details on effective control and ownership".

However, civil aviation minister Ajit Singh had said that he did not "see any major problem for the deal".

Sources had said that following Sebi's concerns, the deal was reworked with changes in share purchase agreement and Articles of Association of the company to ensure that effective control of the company was not transferred to Etihad.

Under the Jet-Etihad deal, after the transactions are cleared by the regulatory authorities, Jet Airways promoter Naresh Goyal will directly own 51% in the airline while Etihad will own 24%.

The FDI policy for civil aviation, which was revised in September last year, allows foreign airlines and foreign institutional investors to invest up to 49% in an Indian airline. NRIs are already allowed 100% investment.

Ahead of the FIPB meet, Jet Airways on Saturday named Australian aviation veteran Gary Kenneth Toomey as its new CEO in place of Nikos Kardassis, who had resigned on May 31.